It's Wizards vs. Pokemon as ex-partners square off

Published 10:00 pm, Friday, October 10, 2003

The Pokemon trading card game has entertained more than 30 million children worldwide.

But now the companies that helped turn the game into a billion-dollar sensation are fighting like two kids in a sandbox.

Renton-based Wizards of the Coast, which until last month was the exclusive manufacturer, distributor and marketer of the cards in North America, Europe and the Middle East, filed a lawsuit last week against Nintendo of America, The Pokemon Co., Pokemon USA and two former executives.

Filed in U.S. District Court in Seattle, the suit alleges patent infringement, breach of contract, misappropriation of trade secrets, tortuous interference with a business relationship, unjust enrichment and other claims.

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"Wizards of the Coast has built tremendous brand equity over the years with our popular proprietary trading card games, and aggressively seeks to protect its valuable intellectual property and trade secrets," the company said in a statement.

Wizards of the Coast spokeswoman Barbara Dawson said the companies initiated settlement talks this week. She expressed confidence that the issue, which does not seek a specific monetary figure, would be resolved.

Pokemon USA spokeswoman Amy Wexler declined to comment on the settlement talks or the case. But the New York company -- a partner with Redmond-based Nintendo of America -- issued a short statement yesterday denying any wrongdoing.

"We were sued the day after our distribution agreement with Wizards ended," the statement said. "We are confident that we've acted both legally and fairly with respect to Wizards and believe these issues will be resolved."

The Wizards lawsuit alleges that at least nine employees were hired by Pokemon USA, including Rene Flores, vice president of marketing, and Richard Arons, senior vice president of non-Magic trading card games. All of the employees had signed non-disclosure agreements in which they agreed not to reveal confidential information to competitors.

Arons and Flores, who were hired in 2002 by Pokemon USA, are named as defendants in the lawsuit.

After those hires, Wizards of the Coast said the relationship with Pokemon USA "turned sour."

"Pokemon USA used the intervening period to undermine its relationship with Wizards, deprive Wizards of the benefit of its bargain and take its intellectual property, all to gain competitive advantage over its longtime partner," the lawsuit says.

Although the contract between the two companies ended Sept. 30, Nintendo of America issued a news release six months ago announcing a new division to manage its trading card business.

"Since Nintendo already produces the Pokemon video games, it's a natural extension for them to distribute and market the trading card games," Pokemon USA President Akira Chiba said in a statement at the time of the release.

Wizards suit alleges that Pokemon USA failed to carry out its contract and therefore Wizards is "entitled to an award of exemplary damages to punish Pokemon USA's wrongful conduct and to make an example of it."

Once the hottest trading card game on U.S. playgrounds, the Pokemon phenomena has run out of steam in recent years. Cards that once traded for hundreds of dollars are now sold for pennies.

In late 2000, Wizards of the Coast laid off 100 employees owing in part to the weakening demand for the game.

Wizards of Coast, which employs 850 people, was purchased by Hasbro Inc. for $325 million in 1999. It is best known for the Magic trading card game.

Nintendo of America is a subsidiary of Nintendo Co., the Japanese game maker that owns the Pokemon trademarks. Pokemon has generated more than $15 billion in merchandise sales.